Consumer loan demand deteriorates

The Daily Shot: 07-May-24
The United States
Canada
The United Kingdom
The Eurozone
Europe
Asia-Pacific
China
Emerging Markets
Cryptocurrency
Commodities
Energy
Equities
Alternatives
Credit
Rates
Global Developments
Food for Thought



 

The United States

1. According to the Fed’s Senior Loan Officer Opinion Survey, banks continue to tighten lending standards for consumer loans such as credit cards and auto loans. However, the number of banks tightening standards is lower than last year.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Demand for consumer loans has been deteriorating.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
The net percentage of lenders tightening mortgage loan standards has declined sharply.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Demand for mortgages appears to be stabilizing.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
We have more data from the Senior Loan Officer Opinion Survey in the Credit section.

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2. The sharp decline in the Citi Economic Surprise Index points to downside risks in Treasury yields.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
In the Citi Economic Surprise Index, both hard and soft (survey-based) data surprises have been declining, with the soft data now aligning more closely with the hard data.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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3. Goldman’s US core inflation tracker is nearing 2%.
 
Source: Goldman Sachs; @MikeZaccardi  
 
GS expects softer inflation data later this year to prompt the Fed to cut rates.
 
Source: Goldman Sachs; @MikeZaccardi  
 
However, MRB Partners expects the core PCE inflation to track in a 3-4% range.
 
Source: MRB Partners  
 
Bloomberg stories mentioning “stagflation” are surging again.
 
Source: BofA Global Research; @MikeZaccardi  

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4. The percentage of Bank of America customers receiving income from gig platforms like ridesharing, deliveries, and social commerce remains elevated.
 
Source: Bank of America Institute  
 
BofA’s internal data suggests ride-sharing demand has been strengthening.
 
Source: Bank of America Institute  
 
There are signs that gig workers rely more consistently on this type of work.
 
Source: Bank of America Institute  

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5. Household deposit levels appear to have stabilized.
 
Source: Torsten Slok, Apollo  


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Canada

1. Consumer confidence is trending lower again.
 

 
2. Economists expect the BoC’s and Fed’s policy trajectories to diverge.
 
Capital Economics:
 
Source: Capital Economics  
 
Morgan Stanley (Fed = blue, BoC = yellow):
 
Source: Morgan Stanley Research  

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3. BofA’s Canada Cycle Indicator is improving, which could bode well for the TSX Index relative to the S&P 500.
 
Source: BofA Global Research  
 
Canadian stocks are trading at a historic discount versus the US.
 
Source: BofA Global Research  
 
TSX’s dividend yield versus the S&P 500 continues to widen.
 
Source: BofA Global Research  
 
The iShares MSCI Canada ETF (EWC) is testing long-term support relative to the SPDR S&P 500 ETF (SPY).
 


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The United Kingdom

1. The BRC/KPMG retail sales index fell sharply last month compared to 2023. A contributing factor, though not the sole reason, was the earlier occurrence of Easter this year (March versus April).
 

 
2. The final PMI report for April confirmed an acceleration in service sector activity.
 
Source: S&P Global PMI  
 
3. Here is a look at perceptions of teenagers’ prospects compared to their parents’ generation.
 
Source: YouGov   Read full article  


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The Eurozone

1. The ECB is on track to cut rates next month.
 
Source: Reuters   Read full article  
 

 
Short-term rates have declined in recent days.
 

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2. The Sentix investor sentiment index has continued to rise, now up for seven consecutive months.
 

 
Source: RTT News   Read full article  
 

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3. The composite April PMI index confirmed the Eurozone’s return to growth, …
 
Source: S&P Global PMI  
 
… boosted by services.
 
Spain:
 

 
France:
 

 
Eurozone:
 

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4. The Citi Eurozone Economic Surprise Index has been outperforming its US counterpart.
 


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Europe

1. Sweden’s services PMI unexpectedly dipped into contraction territory last month.
 

 
2. European corporate earnings are starting to rebound.
 
Source: Deutsche Bank Research  
 
3. Container shipping costs are turning higher as the Suez Canal situation worsens (see the Global Developments section).
 
Source: @TheTerminal, Bloomberg Finance L.P.  


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Asia-Pacific

1. The yen is weakening again after USD/JPY held support at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
EUR/JPY also held (uptrend) support.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Australia’s inflation tracker has been trending lower but remains elevated.
 


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China

1. Service sector growth remained stable last month.
 

 
2. BCA Research lacks confidence in the sustainability of China’s equity market rally.
 
Source: BCA Research  
 
3. Retail sales volumes have weakened.
 
Source: China Beige Book  
 
4. Residential and commercial property sales volumes slowed over the past month.
 
Source: China Beige Book  
 
5. Tourism has been strengthening.
 
Source: Gavekal Research  


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Emerging Markets

1. Brazil’s service sector continues to grow.
 
Source: S&P Global PMI  
 
The nation’s debt-to-GDP ratio keeps grinding higher.
 

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2. Mexico’s job creation rebounded in April.
 

 
3. Vehicle sales in Argentina reflect the deterioration in economic activity …
 

 
… as the country grapples with fiscal austerity.
 
Source: Alpine Macro  

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4. China has been a drag on EM corporate earnings beats.
 
Source: Deutsche Bank Research  
 
5. What are the best funding currencies for carry trades?
 
Source: Mary Nicola, MLIV Macro Strategist     Read full article  


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Cryptocurrency

1. Bitcoin is testing resistance at the 50-day moving average.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
So far, bitcoin is holding trend support above $51.6K after last week’s decline triggered a loss of momentum.
 

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2. The Crypto Fear & Greed Index snapped back into “greed” territory after BTC returned above $60K.
 
Source: Alternative.me  
 
3. The pace of bitcoin ETF inflows has slowed.
 
Source: @KaikoData  
 
4. Only 25% of the top altcoins have outperformed bitcoin over the past month.
 
Source: Blockchain Center  


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Commodities

1. Funds have been rotating out of softs …
 

 
… into grains.
 
Soybeans:
 

 
Wheat:
 

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2. Weather derivatives have become very popular.
 
Source: @markets   Read full article  


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Energy

1. Refining margins have declined in Europe and North America.
 
Source: Reuters   Read full article  
 
2. Russia is rapidly adding LNG production capacity.
 
Source: CREA   Read full article  
 
3. Here is a look at projected US power demand.
 
Source: Goldman Sachs; @MikeZaccardi  


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Equities

1. It’s been a good three days for stocks.
 

 
2. Key US indices have reclaimed their 50-day moving averages.
 

 
3. The rally has been partially fueled by short covering.
 

 
4. The S&P 500 equal-weight index has been underperforming the capitalization-weighted index, while small caps have been outperforming, marking an unusual trend.
 

 
5. Earnings reports continue to show strong profit growth last quarter.
 
Source: Deutsche Bank Research  
 
6. Retail trading activity at Schwab saw a modest pullback in April.
 
Source: Charles Schwab  
 
7. Growth stocks “found religion,” with their correlation to Treasury prices jumping in recent weeks.
 

 
Here is the Magnificent 7 and the S&P 500 equal-weight index.
 

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8. The three-month VIX index is nearing its pre-pandemic lows as the Fed-related concerns ease while earnings remain strong.
 

 
The S&P 500 three-month skew has been tumbling.
 


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Alternatives

1. Hedge funds had a strong quarter.
 
Source: Goldman Sachs  
 
2. Private debt fundraising has slowed.
 
Source: @theleadleft  
 
3. US startup fundraising is off to a slow start this year.
 
Source: Carta  
 
4. VC funding in US healthcare innovation has been surging.
 
Source: Goldman Sachs  


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Credit

1. Banks continue to exercise caution in business lending.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
Demand for business loans remains depressed.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
While fewer banks are tightening lending standards on commercial real estate (CRE) loans, overall, banks remain far more conservative than they were two years ago.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
CRE loan demand has improved substantially since the beginning of 2023 but remains soft.
 
Source: @TheTerminal, Bloomberg Finance L.P.  

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2. Bank loan leverage has been trending lower.
 
Source: @theleadleft  
 
3. More European leveraged loans were quoted at or above par last month – the most since January 2022.
 
Source: PitchBook  
 
4. Corporate bond liquidity has been improving (“PT volumes” = the amount of bond trading done by dealers trading for their own accounts).
 
Source: Barclays Research; III Capital Management  


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Rates

1. How much would yields need to rise to wipe out a year’s worth of interest income?
 
Source: @markets   Read full article  
 
2. Here is a projection of the Fed’s securities holdings over time, provided by Oxford Economics.
 
Source: Oxford Economics  


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Global Developments

1. Global equity risk premia are hitting multi-year lows, making stocks more vulnerable to corrections.
 
Source: Goldman Sachs; @AyeshaTariq  
 
2. The Suez Canal ship transit volume has deteriorated further.
 


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Food for Thought

1. Battery manufacturing overcapacity:
 
Source: @colinmckerrache, @BloombergNEF   Read full article  
 
2. Mobile phone supply chain diversification away from China:
 
Source: Goldman Sachs  
 
3. Trends in acreage for major permanent crops in the US:
 
Source: The Washington Post   Read full article  
 
4. NATO’s military strength on the Eastern European flank:
 
Source: @financialtimes   Read full article  
 
5. Dairy cows infected with the avian flu:
 
Source: @axios   Read full article  
 
6. Religion in the US:
 
Source: Quill Intelligence  
 
7. The world’s longest caves:
 
Source: Statista  
 

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